PB1MAT_01Bahan Pendahuluan Pert 1

8/8/2019 PB1MAT_01Bahan Pendahuluan Pert 1

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KOMPOSISI PENILAIAN

Tugas Mandiri 20% Ujian Tengah Semester 30%

Ujian Akhir Semester 50 %


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PertemuanPertemuan 11

PendahuluanPendahuluan (Introduction)(Introduction)


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INTRODUCTIONINTRODUCTION

Accounting provides information about a firm and its transactionAccounting provides information about a firm and its transactions to facilitate resource allocations to facilitate resource allocationdecisions by users of that information.decisions by users of that information.

International accounting,International accounting, the entity being reported on is either a multithe entity being reported on is either a multi--national company (MNC)national company (MNC)with operations and transactions that cross national boundwith operations and transactions that cross national bound--aries, or an entity with reportingaries, or an entity with reporting

obligations to users who are located in a country other than thaobligations to users who are located in a country other than that of the reporting entity.t of the reporting entity.

Accounting entails several broad processes: measurement, disclosAccounting entails several broad processes: measurement, disclosure, and auditing.ure, and auditing.

MeasurementMeasurementis the process of identifying, categorizing, and quantifying ecois the process of identifying, categorizing, and quantifying economic activities ornomic activities ortransactions. These measurements provide insights into the proftransactions. These measurements provide insights into the prof--itability of a firm's operations anditability of a firm's operations andthe strength of its financial position.the strength of its financial position.

DisclosureDisclosureis the process by which accounting measurements are communicatedis the process by which accounting measurements are communicated to their intendedto their intendedusers. This area focuses on issues such as what is to be reporteusers. This area focuses on issues such as what is to be reported, when, by what means, and tod, when, by what means, and towhom.whom.

AuditingAuditingis the process by which specialized accounting professionals (auis the process by which specialized accounting professionals (auditors) attest to theditors) attest to the

reliability of the measurement and communication process.reliability of the measurement and communication process.


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CONTEMPORARY PERSPECTIVECONTEMPORARY PERSPECTIVE

National controls on capital flows, foreign exchange, foreign diNational controls on capital flows, foreign exchange, foreign direct investment, and relatedrect investment, and relatedtransactions have been dramatically liberalized in recent years,transactions have been dramatically liberalized in recent years, reducing the barriers toreducing the barriers tointernational business.international business.

Advances in information technology are also causing a radical chAdvances in information technology are also causing a radical change in the economics ofange in the economics ofproduction and distribution.production and distribution.

Outsourcing Process for HewlettOutsourcing Process for Hewlett--Packard'sPackard's ProLiantProLiant ML150ML150

IndiaIndia

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ChinaChina TaiwanTaiwan

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AustraliaAustralia

55 SingaporeSingapore HoustonHouston

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HH--P's Path to MarketP's Path to Market

1. Idea for ML150 spawned in Singapore1. Idea for ML150 spawned in Singapore

2. Concept approved in Houston2. Concept approved in Houston3. Concept design performed in Singapore3. Concept design performed in Singapore

4. Engineering design and initial manufacture in Taiwan4. Engineering design and initial manufacture in Taiwan

5. Final assembly in Australia, China, India, and Singapore. Mac5. Final assembly in Australia, China, India, and Singapore. Machines produced in Australia, China, and Indiahines produced in Australia, China, and Indiasold in local markets; machines assembled in Singapore marketedsold in local markets; machines assembled in Singapore marketed to Southeast Asia.to Southeast Asia.


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GLOBAL COMPETITIONGLOBAL COMPETITION

Another factor contributing to the growing importance of internaAnother factor contributing to the growing importance of international accounting istional accounting isthe phenomenon of global competition.the phenomenon of global competition.

In comparing the ROE of an American conIn comparing the ROE of an American con--sumer durables manufacturer withsumer durables manufacturer withSweden's Electrolux, are you really comparingSweden's Electrolux, are you really comparing apples to applesapples to applesor are you comparingor are you comparingapples to oranges!apples to oranges!


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CROSSCROSS--BORDER MERGERS AND ACQUISITIONSBORDER MERGERS AND ACQUISITIONS

As the global trend toward industrial consolidation continues, nAs the global trend toward industrial consolidation continues, newsewsabout internaabout interna--tional mergers and acquisitions is practically a dailytional mergers and acquisitions is practically a dailyoccurrence.occurrence.

While mergers are normally rationalized in terms of operatingWhile mergers are normally rationalized in terms of operatingsynergies or economies of scale, accounting plays a crucial rolesynergies or economies of scale, accounting plays a crucial role ininthese megathese mega--consolidations as accounting numbers areconsolidations as accounting numbers arefundafunda--mental in the corporate valuation process.mental in the corporate valuation process.

For example, corporate valuations are often based on priceFor example, corporate valuations are often based on price--basedbasedmultiples, such as the pricemultiples, such as the price--toto--earnings (P/E) ratio. The approachearnings (P/E) ratio. The approachhere is to derive an average P/E multiple for comparable firms ihere is to derive an average P/E multiple for comparable firms innthe industry and apply this multiple to the reported earnings ofthe industry and apply this multiple to the reported earnings of thethefirm being valued to arrive at a reasonable offering price. A mafirm being valued to arrive at a reasonable offering price. A majorjor

concon--cern of the acquiring firm when bidding for a foreign acquisitiocern of the acquiring firm when bidding for a foreign acquisitionntarget is to what extent the E in the P/E metric is a true refletarget is to what extent the E in the P/E metric is a true reflection ofction ofthe attribute being measured, as opposed to the result of anthe attribute being measured, as opposed to the result of anaccounting measurement difference!accounting measurement difference!


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FINANCIAL INNOVATIONFINANCIAL INNOVATION

Risk management has become a hot buzzword in corporate and finanRisk management has become a hot buzzword in corporate and financialcialcircles. The reason is not hard to find. With continued deregulacircles. The reason is not hard to find. With continued deregulation oftion offinancial markets and capital controls, volatility in the pricefinancial markets and capital controls, volatility in the price of commodities,of commodities,foreign exchange, credit, and equities has become the order of tforeign exchange, credit, and equities has become the order of the day.he day.Given this state of the world, financial managers need to identiGiven this state of the world, financial managers need to identify theirfy theirexposure to this volatility, decide which risks to hedge againstexposure to this volatility, decide which risks to hedge against, and to, and toevaluate the results of their risk management strategy. At the sevaluate the results of their risk management strategy. At the same time,ame time,advances in financial technology have made it possible to shiftadvances in financial technology have made it possible to shift market risksmarket risksto someone else's shoulders.to someone else's shoulders.

The burden of assessing counterparty risk, however, cannot be trThe burden of assessing counterparty risk, however, cannot be transferredansferredand is now placed on the shoulders of a larger pool of market paand is now placed on the shoulders of a larger pool of market participants,rticipants,many of whom may be located thousands of miles away. The dependemany of whom may be located thousands of miles away. The dependencencethis creates on interthis creates on inter--national reporting practices and the resulting confusionnational reporting practices and the resulting confusioncaused by diversity in accountcaused by diversity in account--ing for financial risk products is obvious.ing for financial risk products is obvious.

Those with risk management skills are highly valued by the markeThose with risk management skills are highly valued by the market. Hencet. Hencewe devote an entire chapter, Chapter 11, to the topic of financiwe devote an entire chapter, Chapter 11, to the topic of financial riskal riskmanagement.management.


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EUROPEAN EQUITY MARKETSEUROPEAN EQUITY MARKETSA CLOSER LOOKA CLOSER LOOK

European capital markets are undergoing major, rapid changes, inEuropean capital markets are undergoing major, rapid changes, inpart due to the globpart due to the glob--alizationalization of the world economy and theof the world economy and theincreasing economic integration of the European Union. Theseincreasing economic integration of the European Union. These

changes reflect and exemplify changes taking place in capitalchanges reflect and exemplify changes taking place in capitalmarkets around the world. Thus, a closer look at European equitymarkets around the world. Thus, a closer look at European equitymarkets will help lay the foundation for a better understandingmarkets will help lay the foundation for a better understanding ofofequity markets in general.equity markets in general.

Continental Europe's New Equity CultureContinental Europe's New Equity Culture

Continental European companies have started to increase theirContinental European companies have started to increase theirdisclosure levels, improve their financial reporting, and strengdisclosure levels, improve their financial reporting, and strengthenthentheir corporate governance during the 1990s to attract new capittheir corporate governance during the 1990s to attract new capitalaland investor interest. However, many of these compaand investor interest. However, many of these compa--nies, includingnies, includingsome of the world's largest, still fall short of British and Norsome of the world's largest, still fall short of British and NorththAmerican disclosure and listing standards.American disclosure and listing standards.


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8.8. To what extent do institutional investors face statutory or selfTo what extent do institutional investors face statutory or self--imposed restrictions onimposed restrictions onthe proportion of their investment portfolio that they can holdthe proportion of their investment portfolio that they can hold in securities of foreignin securities of foreign

companies? Sometimes these restrictions force a large internatiocompanies? Sometimes these restrictions force a large international comnal com--pany to listpany to liston many stock exchanges to have access to sufficient institutionon many stock exchanges to have access to sufficient institutional capital. Theseal capital. Theserestrictions are difficult to overcome in some jurisdictions.restrictions are difficult to overcome in some jurisdictions.

9.9. What are the nature and activities of investors in the market? FWhat are the nature and activities of investors in the market? For example, largeor example, largepension funds in the Netherlands, Switzerland, and the United Kipension funds in the Netherlands, Switzerland, and the United Kingdom invest heavilyngdom invest heavily

in equities of both domestic and foreign companies.in equities of both domestic and foreign companies.

10. What is the likelihood that the company will be required to10. What is the likelihood that the company will be required to have locally listed shareshave locally listed sharesto carry out a merger or acquisition in a particular country?to carry out a merger or acquisition in a particular country?

11.11. Will there be a need for locally listed shares to be used in empWill there be a need for locally listed shares to be used in employee stock optionloyee stock optionplans?plans?

PB1MAT_01Bahan Pendahuluan Pert 1

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